Posted at 5:36 PM (CST) by & filed under General Editorial.

Dear Friends,

If you read yesterday’s notes on hyperinflation you now know the common belief that an economy must be in a recovery phase to motivate the velocity of money, which in turn converts expansion of money supply into significant inflation, is a BUSTED ECONOMIC MYTH. History speaks loud and clear to that.

Hyperinflation comes about via a loss of confidence in money. This can be political as well as economic. It can happen to any major currency that weakens. It simply has never occurred by an upturn in business.

The mistaken belief that an up-turn in business activity as an absolutely necessary criterion for the enormous funds now injected and to be injected into the economic system to transmute in an out of control inflation is convenient spin.

Hyperinflation in every case, even those considered political, has been a product of variations of quantitative easing, the process we are now entering.

The key reason why quantitative easing has been so successful at causing hyperinflation is because this method of direct injection is made of liquidity and therefore effectively eliminates and sterilizes the funds so injected.

The reason all historical hyperinflationary events have occurred is due to the failure of attempts to unlock credit lock ups.

The Federal Reserve has no other option than moving to quantitative easing because the Federal Reserve Begging Bowl and the TARP have only served the Good Ole Boy’s Club of Banking.

GE is simply too big to fail. GM is simply too big to fail. Quantitative easing can prevent this but as always, with CONSEQUENCES.

Currency relationships are the final determinant of hyperinflation in every case in history going back to Rome.

The technical dollar rally had to be engineered otherwise TARP or the Begging Bowl could not have been applied.

The credit of unlimited dollars via quantitative easing carries defined dollar consequences that no carry trade nor repatriation can nullify.

So let’s summate what we have discovered by a review of all significant hyperinflationary events in history:

1. The velocity of money increase that transmutes money supply into runaway inflation is currency related in every instance, not business recovering activity related.

2. The tip off to impending hyperinflation is always a currency event. This is without exception and never fails to occur.

3. More than 95% of all hyperinflation events, if not all, started in a business recession or depression, not in a recovery phase of that country’s business activity.

I invite you to try to prove me wrong, knowing you cannot.

The instant the technical dollar rally based on repatriations and carries end, and it will, the process leading to hyperinflation will have begun.

Until then big money will be the buyers of any gold weakness as were certain Middle Eastern entities a week ago.

Those who take delivery of their COMEX contract out of COMEX storage are doing themselves and all of us a favour.

Madness or Reality

Those who are frustrated by gold need to understand that the masses are driven via spin to illusions and madness.

When reality dawns via a break in markets that via spin they have gone mad over, it is too late to do anything but go belly up.

There is a great story that proves this.

Back in 1824 there was a blue-collar worker who had the ability to be a great public speaker.

His topic was his relationship to the then mayor of New York and his observation that the lower end of Manhattan Island was in the process of sinking. He claimed to have been retained by the Mayor of New York to promptly and permanently fix this problem.

The process was simple. He would saw off the lower end of Manhattan then tow it out to sea, turn it around and bring it back properly connecting it with Manhattan, therein resolving the dire problem.

Although that sounded ludicrous and was derided in publications, Lozier persisted. Lozier, purporting his authority, began to order all kinds of supplies, hire workers, and order huge amounts of livestock as food. All of this was in the thousands.

Then came the day for work to start. All items were delivered that day and a huge number of staff as well as lines of workers appeared ready for the task.

The only person missing was Lozier. He was never prosecuted, as everyone fooled by him were too embarrassed to admit they had been had.

This is those in the market who buy the spin that hyperinflation can only be the product of an improving business climate.

You can read about this in the “Grand Deception” by Alexander Klein.

What is occurring now is a “Grand Deception” which due to the unlimited amounts of funds being and to be created gives today’s Lozier an extremely short lifetime.

Posted at 2:16 AM (CST) by & filed under Jim's Mailbox.

Hi Mr. Sinclair,

I am a roofing contractor in New Hampshire. I recently renewed my liability insurance with Essex Insurance. On the declarations page was a small annotation that last year’s policy did not have.

It was typed in red ink which does not show up on a fax or photocopy (coincidence?).

I quote verbatim – "If the company issuing this policy becomes insolvent, the New Hampshire Guaranty Fund shat not be liable for any claims made against the policy."

Regards,
CIGA Ted

Posted at 2:12 AM (CST) by & filed under General Editorial.

Dear CIGAs,

First it was a currency in Crisis, then the “Mother of All Crises.”

The following is the ratio of marks to the dollar through the Weimar experience:

July 1914 – 4.2 marks to the dollar
January 1919 – 8.9
July 1919 – 14.0
January 1920 – 64.8
July 1920 – 39.5
January 1921 – 64.9
July 1921 – 76.7
January 1922 – 1919.8
July 1922 – 493.2
January 1923 – 17,972
July 1923 – 353,412
August 1923 – 4,620,455
September 1923 – 98,860,000
October 1923 – 25,260,208,000
November 15, 1923 – 4,200,000,000,000 (Yes, trillion)
(Source: Gordon Craig, "Germany 1866-1945")

As you can see from the chart below the velocity of money began an upward trip towards hyperinflation as the currency was trading at 76.7 in June/July of 1921. That indicates a significant decline in confidence but not a wholesale rollover of confidence.

November1708-001

The chart below is a good indicator of business activity as it represents unemployment. It must be noted this record comes from Trade Union so it would be somewhat prejudice to the low side as these workers are the most skilled at that time.

November1708-002

The conclusion I come to is the argument that business must be flat to improving in order for the process of hyperinflation to start is not an axiom. It was not true in the Weimar experience as well as most of the modern experiences generally limited to a country or closely allied trade area.

Excerpts From Wikipedia: http://en.wikipedia.org/wiki/Hyperinflation

1. Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money. Either one or both of these encourage inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly. The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation. In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money destroying confidence.

2 “Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

  • – Outright lying in official statistics such as money supply, inflation or reserves.
  • – Suppression of publication of money supply statistics, or inflation indices.
  • – Price and wage controls.
  • – Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
    – Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency”

3. In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government. Because people do not want to hold notes which may become valueless, they want to spend them in preference to holding notes which will lose value. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency — often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleonic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.

4. Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money. Either one or both of these encourage inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly. The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation. In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money destroying confidence.

In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government. Because people do not want to hold notes which may become valueless, they want to spend them in preference to holding notes which will lose value. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency — often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleonic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.

In the monetary model, hyperinflation is a positive feedback cycle of rapid monetary expansion. It has the same cause as all other inflation: money-issuing bodies, central or otherwise, produce currency to pay spiralling costs, often from lax fiscal policy, or the mounting costs of warfare. When businesspeople perceive that the issuer is committed to a policy of rapid currency expansion, they mark up prices to cover the expected decay in the currency’s value. The issuer must then accelerate its expansion to cover these prices, which pushes the currency value down even faster than before. According to this model the issuer cannot "win" and the only solution is to abruptly stop expanding the currency. Unfortunately, the end of expansion can cause a severe financial shock to those using the currency as expectations are suddenly adjusted. This policy, combined with reductions of pensions, wages, and government outlays, formed part of the Washington consensus of the 1990s.

Whatever the cause, hyperinflation involves both the supply and velocity of money. Which comes first is a matter of debate, and there may be no universal story that applies to all cases. But once the hyperinflation is established, the pattern of increasing the money stock, by whichever agencies are allowed to do so, is universal. Because this practice increases the supply of currency without any matching increase in demand for it, the price of the currency, that is the exchange rate, naturally falls relative to other currencies. Inflation becomes hyperinflation when the increase in money supply turns specific areas of pricing power into a general frenzy of spending quickly before money becomes worthless. The purchasing power of the currency drops so rapidly that holding cash for even a day is an unacceptable loss of purchasing power. As a result, no one holds currency, which increases the velocity of money, and worsens the crisis.

That is, rapidly rising prices undermine money’s role as a store of value, so that people try to spend it on real goods or services as quickly as possible. Thus, the monetary model predicts that the velocity of money will rise endogenously as a result of the excessive increase in the money supply. At the point when ordinary purchases are affected by inflation pressures, hyperinflation is out of control, in the sense that ordinary policy mechanisms, such as increasing reserve requirements, raising interest rates or cutting government spending will all be responded to by shifting away from the rapidly dwindling currency and towards other means of exchange.

During a period of hyperinflation, bank runs, loans for 24 hour periods, switching to alternate currencies, the return to use of gold or silver or even barter become common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding specie. There may also be extensive capital flight or flight to a "hard" currency such as the U.S. dollar. This is sometimes met with capital controls, an idea which has swung from standard, to anathema, and back into semi-respectability. All of this constitutes an economy which is operating in an "abnormal" way, which may lead to decreases in real production. If so, that intensifies the hyperinflation, since it means that the amount of goods in "too much money chasing too few goods" formulation is also reduced. This is also part of the vicious circle of hyperinflation.

Once the vicious circle of hyperinflation has been ignited, dramatic policy means are almost always required, simply raising interest rates is insufficient. Bolivia, for example, underwent a period of hyperinflation in 1985, where prices increased 12,000% in the space of less than a year. The government raised the price of gasoline, which it had been selling at a huge loss to quiet popular discontent, and the hyperinflation came to a halt almost immediately, since it was able to bring in hard currency by selling its oil abroad. The crisis of confidence ended, and people returned deposits to banks. The German hyperinflation of the 1920s was ended by producing a currency based on assets loaned against by banks, called the Rentenmark. Hyperinflation often ends when a civil conflict ends with one side winning. Although wage and price controls are sometimes used to control or prevent inflation, no episode of hyperinflation has been ended by the use of price controls alone. However, wage and price controls have sometimes been part of the mix of policies used to halt hyperinflation.

As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

* By late 1923, the Weimar Republic of Germany was issuing fifty-million Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government’s Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 billion on the long scale).[6] [7]. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) Marks.[8]

* The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 trillion on the long scale). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however didn’t depict the number, making the 500,000,000,000 Yugoslav dinar banknote the world’s leader when it comes to depicted zeros on banknotes.

* The Z$100 billion agro cheque, issued in Zimbabwe on July 21, 2008, shares the record for depicted zeroes (11) with the 500 billion Yugoslav dinar banknote.

* The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016%) for July, 1946, amounting to prices doubling every thirteen and one half hours.

One way to avoid the use of large numbers is by declaring a new unit of currency (an example being, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars".) An example of this would be Turkey’s revaluation of the Lira on January 1, 2005, when the old Turkish lira (TRL) was converted to the New Turkish lira (YTL) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen the actual value of a currency, it is called redenomination or revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful).

Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded the face value. Massive amounts of coinage were melted down, usually illicitly, and exported for hard currency.

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

* Outright lying in official statistics such as money supply, inflation or reserves.
* Suppression of publication of money supply statistics, or inflation indices.
* Price and wage controls.
* Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
* Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.

To read more on Hyperinflation on Wikipedia click here

To read more on the Weimar Republic on Wikipedia click here

Posted at 2:45 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Recall that big increase in the November Gold contract’s open interest on Thursday of last week in which 886 new contracts were put on in that particular month. Prior to Thursday there were only 83 contracts outstanding in the November. It appears that those contracts were instituted for the express purpose of taking delivery as this morning’s data from the Comex stated that 823 of them were indeed assigned. Now we need to watch to see whether or not they will be retendered. If not, it will be encouraging.

Over the last few days, JP Morgan Futures division has consistently been the largest issuer of the gold while Bank of Nova Scotia has consistently been the largest stopper. Bank of Nova Scotia generally is a large stopper anyway so that is not unusual in itself. The question we would have is with Morgan. Unfortunately, we have no way of knowing for whom Morgan is doing the selling as that information is confidential outside of the firm and the warehouses but we do know that BNS was the buyer.

Click chart to enlarge today’s 12 hour action in gold in PDF format as of 12:30 pm CDT with commentary from Trader Dan Norcini.

November1708Gold1230pmCDT

Posted at 11:01 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The question is how many hedge funds will fail.

It is reasonable to assume that whatever these funds could sell they would have sold before D-Day, leaving only OTC derivatives with no markets.

Hedge funds brace for D-Day
November 14, 2008

Anxiety is sweeping the hedge fund industry before a crucial deadline on Saturday, when investors angered by recent heavy losses are expected to demand the return of billions of dollars.

"Managers have a pretty good feeling for what is coming, and there are significant redemption requests out there,” said Stewart Massey, founding partner of Massey, Quick & Co, an investment consultant that puts money into hedge funds.

Saturday is the last day for thousands of investors to notify hundreds of hedge funds if they want their money back by year’s end.

Hedge funds that require three months notice from investors who wanted to exit by year’s end had a similar deadline on September 30 – also known in the industry as "D-Day.”

More such deadlines loom for funds that allow investors to give less notice before taking their money out, fund managers said.

In the last two days, several prominent fund managers made public predictions that illustrate the depth of gloom now sweeping the $US1.7 trillion ($2.6 trillion) hedge fund industry.

More…

 

Jim Sinclair’s Commentary

They are not alone. You said business would be worse in Euro land? Right now that looks like an urban legend.

Freddie Mac says it is worth less than zero
Suzy Jagger in New York

Freddie Mac, the US mortgage giant, yesterday admitted that it is so overwhelmed by its liabilities that without government backing, it would no longer be a viable business. The company said that it had lost $13.7 billion (£9.2 billion) in the third quarter of the year and begged for $13.8 billion from the US Treasury in rescue funds.

The plea for the multibillion-dollar cash injection came just days after Fannie Mae reported a record $29 billion loss for the period and gave warning that it was haemorrhaging cash so rapidly, it might need federal funds by the end of the year to survive.

The US Treasury has been overwhelmed by requests for federal aid in the past few weeks. In addition to setting up a $700 billion bailout fund to take equity stakes in troubled banks, the Treasury is being pressed by the car industry for a cash bailout. Yesterday, Neel Kashkari, the Assistant Treasury Secretary, said that he was under pressure to consider ways of using the $700 billion bailout to stem a surge in foreclosures across the US.

The Freddie Mac request for funds would see the drawing down of part of the $100 billion in emergency reserves that were committed by the Treasury in September. Freddie Mac’s problems during the third quarter fell into two categories – the continuing real-estate slump, which has been accompanied by a sharp increase in mortgage borrowers defaulting on repayments, and a tax-related charge. The company had to admit that it cannot use tax credits listed on its balance sheet as assets, because it has not generated enough taxable income.

More…

 

Jim Sinclair’s Commentary

Standard much ado about nothing.

IMF chief: G-20 action plan a significant step toward stronger int’l cooperation

WASHINGTON, Nov. 15 (Xinhua) — The chief of the International Monetary Fund (IMF) on Saturday hailed the action plan agreed at the G-20 summit as a significant step by the international community toward stronger cooperation.

"The most important outcome of this weekend’s meeting is agreement on an action plan and the commitment of all participants to implement the plan vigorously and fully," IMF Managing Director Dominique Strauss-Kahn told a press conference.

"The IMF will give strong support to these efforts, as called for by the G-20," Strauss-Kahn added.

The chief of the 185-member IMF said he was "very pleased" about the G-20 leaders’ strong support for the important role of the Fund in crisis management and the reform of the international financial architecture.

"In addition to helping some member countries that are facing difficult circumstances with rapid and effective support, we have also created a new short-term liquidity facility and continue to review our instruments and facilities," he said.

More…

 

Jim Sinclair’s Commentary

Sadly this is the Bear Stearns, Lehman Brothers and most likely GE and GM retirement programs. They are either unfunded or loaded with their own common stock.

Poverty, Pension Fears Drive Japan’s Elderly Citizens to Crime
By Stuart Biggs and Sachiko Sakamaki

Nov. 14 (Bloomberg) — More senior citizens are picking pockets and shoplifting in Japan to cope with cuts in government welfare spending and rising health-care costs in a fast-ageing society.

Criminal offences by people 65 or older doubled to 48,605 in the five years to 2008, the most since police began compiling national statistics in 1978, a Ministry of Justice report said.

Theft is the most common crime of senior citizens, many of whom face declining health, low incomes and a sense of isolation, the report said. Elderly crime may increase in parallel with poverty rates as Japan enters another recession and the budget deficit makes it harder for the government to provide a safety net for people on the fringes of society.

“The elderly are turning to shoplifting as an increasing number of them lack assets and children to depend on,” Masahiro Yamada, a sociology professor at Chuo University in Tokyo and an author of books on income disparity in Japan, said in an interview yesterday. “We won’t see the decline of elderly crimes as long as the income gap continues to rise.”

Crime rates among the elderly are rising as the overall rate for Japan has fallen for five consecutive years after peaking in 2002. Over 60s accounted for 18.9 percent of all crimes last year compared with 3.1 percent in 1978, with shoplifting accounting for 80 percent of the total, the report said.

More…

Posted at 3:36 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Gold is on its way back into the monetary system. That is certain.

It is also certain that one method being examined at the highest level is the Federal Reserve Gold Certificate Ratio, Modernized and Revitalized and no longer directly connected to interest rates.

If you are one of the gold gang that fears Volcker as an advisor to Obama, then you are ignorant of Volcker’s previous position on gold early in his career. I believe he is this time pro-gold because of the Mother of All Crises – his description of the conditions now.

Volcker does not waste words, nor is he glitzy. This is the Mother of All Crises, settlement of which demands a gold criterion which is the FRGCR.

The price will float but around a pivot point of $1650 (or higher). It will more than likely be within $200 based on expansion or contraction of a measure of US international debt.

Stable Money Is the Key to Recovery
How the G-20 can rebuild the ‘capitalism of the future.’
By JUDY SHELTON
NOVEMBER 14, 2008

Tomorrow’s "Summit on Financial Markets and the World Economy" in Washington will have a stellar cast. Leaders of the Group of 20 industrialized and emerging nations will be there, including Chinese President Hu Jintao, Brazilian President Luiz Inacio Lula da Silva, King Abdullah of Saudi Arabia and Russian President Dmitry Medvedev. French President Nicolas Sarkozy, who initiated the whole affair, in order, as he put it, "to build together the capitalism of the future," will be in attendance, along with the host, our own President George W. Bush, and the chiefs of the World Bank, the International Monetary Fund and the United Nations.

When President Richard Nixon closed the gold window some 37 years ago, it marked the end of a golden age of robust trade and unprecedented global economic growth. The Bretton Woods system derived its strength from a commitment by the U.S. to redeem dollars for gold on demand.

True, the right of convertibility at a pre-established rate was granted only to foreign central banks, not to individual dollar holders; therein lies the distinction between the Bretton Woods gold exchange system and a classical gold standard. Under Bretton Woods, participating nations agreed to maintain their own currencies at a fixed exchange rate relative to the dollar.

Since the value of the dollar was fixed to gold at $35 per ounce of gold — guaranteed by the redemption privilege — it was as if all currencies were anchored to gold. It also meant all currencies were convertible into each other at fixed rates.

Paul Volcker, former Fed chairman, was at Camp David with Nixon on that fateful day, Aug. 15, when the system was ended. Mr. Volcker, serving as Treasury undersecretary for monetary affairs at the time, had misgivings; and he has since noted that the inflationary pressures which caused us to go off the gold standard in the first place have only worsened. Moreover, he suggests, floating rates undermine the fundamental tenets of comparative advantage.

"What can an exchange rate really mean," he wrote in "Changing Fortunes" (1992), "in terms of everything a textbook teaches about rational economic decision making, when it changes by 30% or more in the space of 12 months only to reverse itself? What kind of signals does that send about where a businessman should intelligently invest his capital for long-term profitability? In the grand scheme of economic life first described by Adam Smith, in which nations like individuals should concentrate on the things they do best, how can anyone decide which country produces what most efficiently when the prices change so fast? The answer, to me, must be that such large swings are a symptom of a system in disarray."

More…

Posted at 3:31 PM (CST) by & filed under In The News.

Gold May Spike to $2000 in Medium Term

Gold can easily go up to $1500-$2000 in the medium-term, says Johann Santer, MD at Superfund Financial Hong Kong. As such, he tells CNBC’s Martin Soong that gold at $710 is a good entry point.

Click here to view video…

Jim Sinclair’s Commentary

G20:

President Bush says that TRANSPARENCY is very important.

Will the Federal Reserve yield the secret details of the two trillion dollar bailout?

Health Care:

More than 90 percent of reasonably sized cities and towns in the USA would be insolvent if they were required to put up the cost of their commitment to provide health care for retired employees. TRANSPARENCY anyone?

Jim Sinclair’s Commentary

If they are making applications to the Fed it says loud and clear:

1. They cannot finance in the commercial paper market.

2. They are in trouble to some degree.

3. The commercial paper market still stinks and Lie-bor does not reflect much.

Textron, AEP Ask for Access to Commercial-Paper Fund (Update1)
By Robert Schmidt and Bryan Keogh

Nov. 14 (Bloomberg) — A group of companies including Textron Inc., Nissan Motor Co. and American Electric Power Co. is pressing the Federal Reserve to expand purchases of commercial paper to include them.

The coalition wants the Fed to go beyond top-rated paper and buy debt with the second-highest grade, two people said on condition of anonymity. American Electric Chief Financial Officer Holly Koeppel said the group is seeking to add more companies and preparing a letter to outline its case.

While accepting lower-grade debt could reduce borrowing costs for a broader group of companies, it would also expose the taxpayer to greater risk. The request is one of a number of attempts to get a share of federal rescues, with industries from automakers to heating-oil retailers seeking funds.

“We are really creating a mindset where no one fails,” said Adolfo Laurenti, a senior economist at Mesirow Financial Inc. in Chicago.

Second-tier issuers of commercial paper, debt that matures in nine months or less and is a form of IOU for day-to-day expenses such as payrolls and rent, argue they’re disadvantaged by the Fed’s new Commercial Paper Funding Facility.

More…

Jim Sinclair’s Commentary

Sounds reasonable to me.

Iran switches reserves to gold: report
Sat Nov 15, 2008 3:14am EST

TEHRAN (Reuters) – Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world’s fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency…the country’s money reserves were changed into gold so that we wouldn’t be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.

More…